Small business: “World-class apps—or else”

Small business executives want to be able to do business remotely, whether they are up to their necks in work, or up to their ankles in surf.

Your small business customer’s taking a vacation, but complete disconnection is out of the question. “Downtime” is when administrative work gets done. Can your bank supply a satisfactory mobile business experience?

“Yes” had better be your answer, soon, according to new research. Banks must do a better job providing digital and, in particular, mobile, services to small business customers, or risk losing them to other providers.

That’s the conclusion of a report by Aite Group prepared for Bill.com, a digital business payments provider that works with many financial institutions.

Millennials drive urgency

The report’s warning looms more strongly as millennials increasingly become small business owners themselves and bring their high expectations for banking digital solutions.

“Milliennials have grown up with technology—and they’ve grown up with a set of expectations that have been informed by their experience with consumer interfaces and consumer apps,” says Sanjeev Kriplani, senior vice-president, product management, at Bill.com, in an interview with Banking Exchange. “As increasing numbers of them become small business owners, they won’t tolerate anything other than that experience with a bank.”

Kriplani believes banks have handled the consumer offerings well, but must catch up on the business side.

“I think banks have a ways to go on their small business platforms to really become relevant enough and digitally friendly enough to make their offering the right one for millennials,” says Kriplani.

Many business apps don’t do enough

In October, Aite surveyed 1,000 small businesses. Of these, 45% report using their bank’s mobile banking offering. Among businesses owned or run by millennials, that percentage is 53%.

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However, Aite states in its report, “despite rising adoption, most usage to date has been limited to basic capabilities, such as checking balances. Common bank practices of serving small businesses from consumer mobile platforms, coupled with a lack of robust business mobile functionality, have prevented many banks from driving adoption to desired levels.”

At the very least, says Aite, bank offerings, particularly through mobile use of services, should include the ability to:

• Initiate or more often authorize payments requiring a second layer of approval while out of the office.

• View images of checks the bank has flagged as potentially fraudulent and quickly make pay/no pay decisions.

• Deposit checks remotely.

“More must be done to bring mobile adoption to the next level, strengthen its value proposition, make its usage more frequent, and prevent small businesses from going elsewhere to make mobile payments,” says Aite.

Bill.com’s Kriplani gives this example of where some bank small business apps fall short: “Businesses, when they do bill pay, generally want to pay a specific invoice or invoices. A traditional online bill pay solution doesn’t make that easy. They force you to type in a number in a field. If you’re paying two invoices, that doesn’t work.”

How to get it right

Key to upgrading functionality to small business banking apps is the combination of mobile channel access, backed by cloud-based services.

“There are two aspects of being a small business owner that make the cloud a very, very powerful solution,” says Kriplani.

One aspect is the range of cloud-based functionalities. “For example,” says Kriplani, “the accounting apps that small businesses are using now are moving to the cloud very aggressively.”

However, mobility, he says, is the key benefit, again backed by cloud, even to small businesses that seemingly are rooted in brick-and-mortar stores.

This manifests itself, in turn, in two ways.

First, “one of the patterns we’ve found is that small business people often do their administrative tasks when the shop is closed. That’s the only time they have,” Kriplani explains. “So, being able to do it while on a business trip or while at home, they are increasingly moving to mobile.”

Second, small business owners need flexible services to match their flexible use of time. Kriplani gives an example of the type of executive he has in mind: “He’s a small business owner but he actually wants to take a vacation every now and then. But just because he takes a vacation doesn’t mean his vendors allow him to delay paying his bills. Well, he can’t sign checks when he’s on the beach in Aruba. But he can pull out his mobile phone and click a button and pay.”

So the evidence is there of a demand from small business owners as they become aware of potential services, Kriplani says. Where will the supply come from?

Can banks meet the need?

“Small businesses are going to trust their banks first for these services,” Kriplani says. “If the bank can deliver them in an incredibly user-friendly way the small business will adopt them from their bank. We’ve seen this over and over again.

On the other hand, he continues, “if the bank can’t deliver it in a user-friendly way, small businesses will either go to a bank that can or go to a nonbank.”

Partnering for customer satisfaction

Supplying the services becomes the challenge, and that’s where banks—of all sizes—need to consider third-party providers.

“One of the great things about the banking ecosystem is that service providers have evolved to serve banks of all sizes,” Kriplani says. “The infrastructure is out there for banks to find the best provider who’s going to be relevant to their customer base, even as the customer base grows more demanding.”

Crucial to finding a third-party provider, he points out, is the due diligence on the part of the bank to make sure the potential vendor has invested sufficiently in regulatory compliance. Regulators place increasing emphasis on banks’ ultimate responsibility for their vendors’ performance.

That must be weighed with small business customers’ increasing demand for 21st century services.

“The expectation is building,” says Kriplani. “If a bank can’t offer a really simple and friendly small business-specific experience, it is going to start seeing attrition of businesses to competitors who do offer that.”

John Ginovsky is a contributing editor of Banking Exchange and editor of the publication’s Tech Exchange e-newsletter. For more than two decades he’s written about the commercial banking industry, specializing in its technological side and how it relates to the actual business of banking. In addition to his weekly blogs—"Making Sense of It All"—he contributes fresh, original stories to each Tech Exchange issue based on personal interviews or exclusive contributed pieces. He previously was senior editor for Community Banker magazine (which merged into ABA Banking Journal) and for ABA Banking Journal and was managing editor and staff reporter for ABA’s Bankers News. Email him at jginovsky@sbpub.com.